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Gold lifted by Fed plans for interest rates

Gold rose as its inflation-hedge appeal received a boost after the US Federal Reserve said it intends to keep interest rates near zero as long as unemployment remains high.

Bullion prices jumped in choppy trade after the Fed unveiled a fresh round of Treasury purchases. It committed to monthly purchases of $US45 billion ($A43 billion) in Treasuries on top of the $US40 billion a month in mortgage-backed bonds it started buying in September.

In a surprise move, the Fed also adopted numerical thresholds for policy, a step that had not been expected until early next year.

It said it will likely keep official rates near zero for as long as unemployment remains above 6.5 per cent, inflation is no more than 2.5 per cent for the next one to two years, and inflation expectations remain contained.

"That's bullish for gold for the Fed to say it will keep interest rates low until unemployment rate drops to 6.5 per cent - it doesn't look like that's going to happen anytime soon," said Bill O'Neill, a partner with commodities investment firm LOGIC Advisors.

Last Friday, the Labor Department said that unemployment rate fell to a near four-year low of 7.7 per cent as companies kept up their slow but steady hiring pace in November.

Economists, however, do not expect a speedy job recovery for unemployment to hit the Fed's new target.

Spot gold was up 0.6 per cent at $US1720.20 an ounce by lunchtime in New York, though it gave up much of that gain in the afternoon and in recent trade was at $US1713.85.

US COMEX gold futures for February delivery were up $12.40 an ounce at $1722 in heavy trading.

Silver, which tends to be more volatile than gold, rose 2.2 per cent to $33.67 an ounce.